Bitcoin mining centralization problem solved with a new proposal from Bitcoin Core dev

Matt Corallo (also known as TheBlueMatt), a dedicated Bitcoin Core supporter and developer, recently published a Bitcoin Improvement Proposal on github. Bitcoin Improvement Proposals or BIPs are an important part of the Bitcoin Project, as they are the only way of communicating ideas for protocol improvement in a decentralized, structureless entity like Bitcoin. Mr. Corallo’s BIP suggested that a new mining protocol is required to tackle the issue of Bitcoin mining network becoming more centralized by the day. The protocol he suggested as a replacement was developed by Corallo himself and is called “BetterHash”.

Corallo suggested that current most widely-used Stratum protocol is one of the main reasons why the current mining ecosystem is heading towards increased centralization.

“Difficult to implement and poorly documented, the design of the Stratum protocol requires pool operators to build and distribute block templates to their clients. Without a diverse body of miners constructing block templates, the network’s censorship resistance is jeopardized (e.g. pool operators may use their position of power to restrict the flow of protocol upgrades).”

Corallo clearly feels that Stratum, combined with the general miner tendency to move their hashing power into mining pools, limits the network’s ability to diversify its block templates. This makes certain centralized sources of hashpower more influential than the rest of the network. Solo miners who want to use their own templates will be left behind, as their mining payouts won’t be as good as they would have been if they were a member of a big mining pool. Alongside taking the lion’s share of the mining profit, centralized pools have the ability to influence the network’s decision making process which makes the network less censorship resistant.

Read: What is pool mining? 

Read: Is bitcoin mining profitable?

Read: How long does it take to mine a bitcoin?

Corallo states that BetterHash, a system which divides block construction and payouts into two protocols (Work and Pool), needs to replace Stratum for the problem to be solved. This would allow miners to create their own block templates and decide for themselves which transactions they want to include in their blocks, while limiting the pool operator’s ability to influence that decision. BetterHash doesn’t allow pool operators to adopt or ignore certain network upgrades and features. Miners can make choices independent of the network while staying a part of the pool and enjoying regular payments.

With BetterHash miners will still be able to adopt the templates and strategies of a mining pool. This new dual protocol simply gives them a choice in the matter. For a complete list of suggested improvements that BetterHash comes with, check out Mr. Corallo’s github post.

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